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August 16, 2016, 10:33 P.M. ET

BlackRock Sees No End To Emerging Markets Party

By Shuli Ren

BlackRock does not see the Federal Reserve making a move any time soon, even though New York Fed President William Dudley said yesterday a September rate hike is still on the cards.

According to BlackRock strategist Richard Turnill, yes, their “Yellen Index”, a gauge of 10 key labor market indicators that the Fed likely watches, has picked up, but it is still well-below the levels shown in December before the Fed raised its benchmark rates (check out their “chart of the week” through the link above). “Stronger U.S. jobs data have fueled speculation of more Fed rate hikes, while central banks in the UK, eurozone and Japan are going strong with monetary easing. We believe such expectations are overblown.”

BlackRock sees the Fed raising rates only once this year – in December.

The lower rates for longer outlook is great news for emerging markets, which tend to fall when U.S. rates rise. “It also buys time for EMs to implement structural reforms, such as India’s recent tax reform and Indonesia’s renewed push for fiscal reform,” wrote BlackRock.

The asset manager continues to be Overweight on emerging markets debt but Neutral on emerging markets equities, although it said “we prefer domestically oriented stocks and EMs with reform momentum.” I am assuming India and Indonesia?

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About Asia Stocks to Watch

Barrons.com’s Asia Stocks to Watch blog analyses news and research from this vibrant and diverse continent, challenges conventional wisdom, and discusses investment ideas from Shanghai to Singapore, and from Indonesia to India.

Shuli Ren has written for Dow Jones Newswires on corporate strategies and Asia markets. Before becoming a journalist, Shuli conducted quantitative equity research at Lehman Brothers, and later Barclays Capital. She was also a consultant for Charles River Associates. She holds a CFA and FRM and studied economics at the University of Chicago’s graduate school.